It sounds too good to be true: rather than letting time work its healing magic on your credit score, you can purchase the services of a credit repair firm to improve your score in just a few months and be on your way to a new home purchase. But what do credit repair services cost and how effective are they?
The short answer is that, like most things that sound too good to be true, a quick fix to your credit score is probably not the best use of your hard-earned cash. While there are some credit repair companies that are complete scams, in many cases, the services offered actually can have a positive impact on your credit score.
However, with a little time and effort, you can go through the same credit repair steps and get similar results. Plus, there is the chance that engaging the services of a credit repair company could actually harm your credit score rather than pulling it upward.
The riskiest path to take in seeking to improve your credit score is to employ the services of a credit repair agency. There are many credit repair organizations that will simply take hundreds, even thousands, of your hard-earned dollars but do nothing to improve your score.
If you decide to go this route, do your homework. Check into online reviews, particularly with reputable sites like the Better Business Bureau. Avoid companies that require a great deal of money upfront or that force you into a long-term contract.
Some credit repair agencies will advertise that they have actual credit repair attorneys available to take over your case.
But don’t be fooled into thinking these companies can do more for you than those not advertising they have an attorney. Many are law firms in name only. They do not have attorneys working your case.
Prices for these credit repair services can range from as little as $35—$50 a month, on up to several hundred monthly. Many also charge fees for things like securing a copy of your credit report. While most agencies charge by the month, a few ask for a lump sum upfront to perform a set of steps designed to improve you credit score.
The biggest reason you should think twice before paying to have a company improve your credit score is because in most cases, those companies are going to take the same steps you can legally take on your own to clean up your score.
The fact is, it is your right to dispute any errors you find on your credit report and the three major credit bureaus must investigate your dispute at no additional charge. That means, anything a credit repair organization can do for you legally, you could be doing on your own.
The three major credit reporting bureaus each have websites that provide information on the procedure you should follow for disputing erroneous information. In most cases, you will have the option of filling out a form online or mailing a letter.
Be aware, the only information you can have removed legally from you credit report is information that is in error. Credit repair organizations that claim they can do more than that are not being entirely truthful and are best to be avoided since their actions may not be legal.
Keep in mind also that If you file disputes that the bureaus deem are frivolous, which usually occurs when a consumer disputes all or most of any negative items on his or her report without providing any supporting documentation, your score could actually decrease.
Unlike a credit repair company, a credit counseling organization is typically in the business of helping you to make better credit decisions in the future.
While they are not likely to offer a quick solution, these organizations—particularly those that are organized as nonprofits—can provide some assistance in getting your credit back on track. Many will even negotiate payment plans with your creditors on your behalf.
If you are looking to improve your credit score so you can get the best possible interest rate on a future real estate purchase, making use of services offered by a credit counseling organization, particularly when the services are free or at little cost to you, may be the right choice.
In addition, it’s always a good practice to obtain a copy of your credit report and dispute any erroneous statements prior to applying for a loan. However, this step can be take on your own, without the cost of a credit repair agency.